A Look into the Tax Advantages of Leasing Equipment

What do the tax advantages of leasing equipment do for your business financially?

tax advantages of leasing equipmentAll companies need an effective way to get their business set up, whether they’re starting a restaurant or a running a convenience store. It’s always the finances that become a factor however, changing what a business purchases and when it makes those purchases.

After all, with so many different forms of expenses to deal with, making sure you pay for everything you need effectively can be quite difficult. When businesses start up, they generally don’t have much as far as funds and making sure all of the proper expenses are taken care of can be quite tricky.

However, there are alternative solutions that many business owners look into, like taking out an equipment lease for their business so they can pay less and get equipment. That way, you don’t have to worry about large equipment fees and can still get good hardware in your business.

There are many positive and negative factors to an equipment lease, especially compared to purchasing your equipment, but comparing factors like the tax advantages of leasing equipment is important in the long run.

In other words, in your specific case, how does an equipment lease play out to your advantage or disadvantage versus you purchasing your equipment?

Equipment Leasing versus Purchasing

There are many reasons business owners prefer to be able to get an equipment lease, mainly because they can break up their payments and make everything easier for them. Instead of paying for all of that equipment right up-front, you can pay a monthly rate for your equipment.

Plus, these payments are generally both low and flat, meaning you don’t have to worry about interest the way you would if you had a bank loan. While purchasing has advantages in the sense that you get the benefit of ownership and get some funding for business equipment, it can tend to give you issues in the long run.

Many company owners will scrape together the funds to make the one purchase, only to deal with issues later on when their equipment inevitably breaks down. Business equipment doesn’t generally last very long because it’s consistently being used, meaning when the time comes you need to pay again to replace that equipment.

The reason a lease can be more advantageous is that an equipment lease will allow you to retain the service of actually having the equipment versus owning the equipment itself.

That means, during a lease, you get equipment in your business no matter what: if it breaks, the leasing company fixes the hardware for you. As long as your business keeps paying that monthly rate, you get equipment in your company for the entire duration of the lease.

Tax Advantages of Leasing Equipment

There are many other advantages to leasing equipment for your business, like the tax advantages of leasing equipment. Basically, it’s just money in your pocket every year come tax return time, and that’s just some of the money you get back through a good lease.

Not having to deal with repairs and not having to pay so much up-front is extremely advantageous for your business, but this all depends on the lease you get. There are such things as good leases and bad leases, and there are times where it’s just better to purchase.

For example, there’s no point in leasing a few tools that you need: they’re cheap, easily replace, and last a while, so they’re better for purchasing. However, with capital equipment and just hardware that’s not going to last a long time, it’s better to get a lease as long as that lease is ideal for your company.

You don’t want to get a lease for your business with too long a contract period or too high a lease rate; you need to determine everything you want out of a lease before you even begin your search.

Then, when you shop for your lease, it’s important that you don’t settle until you get the best possible equipment lease for your business. To learn more about the tax advantages of leasing equipment, click here.